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Geometric and long run aspects of Granger causality

This paper extends multivariate Granger causality to take into account the subspaces along which Granger causality occurs as well as long run Granger causality. The properties of these new notions of Granger causality, along with the requisite restrictions, are derived and extensively studied for a wide variety of time series processes including linear invertible process and VARMA. Using the proposed extensions, the paper demonstrates that: (i) mean reversion in L2 is an instance of long run Granger non-causality, (ii) cointegration is a special case of long run Granger non-causality along a subspace, (iii) controllability is a special case of Granger causality, and finally (iv) linear rational expectations entail (possibly testable) Granger causality restriction along subspaces.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/1356.pdf
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1356.

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Date of creation: Jan 2013
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Handle: RePEc:upf:upfgen:1356
Contact details of provider: Web page: http://www.econ.upf.edu/

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  1. Granger, C. W. J., 1988. "Causality, cointegration, and control," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 551-559.
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  4. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
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  9. Al-Sadoon, M.M., 2009. "Causality Along Subspaces: Theory," Cambridge Working Papers in Economics 0919, Faculty of Economics, University of Cambridge.
  10. Dufour, J.M. & Renault, E., 1995. "Short-Run and Long-Rub Causality in Time Series: Theory," Cahiers de recherche 9538, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  11. C. Bruneau & E. Jondeau, 1997. "Long-run causality, with an application to international links between long-term interest rates," THEMA Working Papers 97-26, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  12. Lars Peter Hansen & Thomas J. Sargent, 1979. "Formulating and estimating dynamic linear rational expectations models," Working Papers 127, Federal Reserve Bank of Minneapolis.
  13. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 393-95, October.
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  19. Otter, Pieter W, 1990. "Canonical Correlation in Multivariate Time Series Analysis with an Application to One-Year-Ahead and Multiyear-Ahead Macroeconomic Forecasting," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(4), pages 453-57, October.
  20. Halbert White & Xun Lu, 2010. "Granger Causality and Dynamic Structural Systems," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 8(2), pages 193-243, spring.
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  23. Poskitt, Don S, 2000. "Strongly Consistent Determination of Cointegrating Rank via Canonical Correlations," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(1), pages 77-90, January.
  24. Yamamoto, Taku & Kurozumi, Eiji, 2003. "Tests for Long-Run Granger Non-Causality in Cointegrated Systems," Discussion Papers 2003-12, Graduate School of Economics, Hitotsubashi University.
  25. Granger, C. W. J., 1980. "Testing for causality : A personal viewpoint," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 329-352, May.
  26. Jonathan B. Hill, 2007. "Efficient tests of long-run causation in trivariate VAR processes with a rolling window study of the money-income relationship," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(4), pages 747-765.
  27. Thomas J. Sargent & Christopher A. Sims, 1977. "Business cycle modeling without pretending to have too much a priori economic theory," Working Papers 55, Federal Reserve Bank of Minneapolis.
  28. Geweke, John, 1984. "Inference and causality in economic time series models," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 19, pages 1101-1144 Elsevier.
  29. Juselius, Mikael, 2008. "Cointegration implications of linear rational expectation models," Research Discussion Papers 6/2008, Bank of Finland.
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  31. Eichler, Michael, 2007. "Granger causality and path diagrams for multivariate time series," Journal of Econometrics, Elsevier, vol. 137(2), pages 334-353, April.
  32. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 369-80, October.
  33. TjOstheim, Dag, 1981. "Granger-causality in multiple time series," Journal of Econometrics, Elsevier, vol. 17(2), pages 157-176, November.
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  35. Sims, Christopher A, 2002. "Solving Linear Rational Expectations Models," Computational Economics, Society for Computational Economics, vol. 20(1-2), pages 1-20, October.
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